Rising Oil Shipments
In November 2023, shipments of Russian Urals crude oil to Turkey reached an all-time high of 400,000 barrels per day (bpd), constituting approximately 14% of Russia’s overall seaborne oil exports that month. This surge in oil supplies is expected to continue as private Russian oil producer Lukoil recently inked a deal with Azeri firm SOCAR to refine up to 200,000 barrels per day of its oil at Socar’s Turkish STAR refinery. According to trading sources, this will further boost supplies to Turkey in the coming months.
Increased Imports of Refined Products
Apart from the rising crude oil supplies, Turkey has also witnessed a significant surge in imports of Russian diesel, heating oil, jet fuel, and marine fuel. From January to November 2023, imports of these distillates to Turkey increased by 200% to approximately 0.29 million barrels per day. During the same period, Russia supplied Turkey with 13 million tonnes of distillates, including 8.6 million tons of ultra-low sulfur diesel (ULSD 10ppm), as compared to 4.3 million tons in 2022.
Cost Savings and Benefits for Turkey
The cost savings for Turkey have been substantial, with the country paying between $25 and $150 less per ton ($3.3-20 per barrel) for Russian diesel compared to prices in the Mediterranean. Similarly, crude oil from Russia has been sold to Turkey at discounted rates, with savings of $5-20 per barrel. These cheaper energy imports have helped Turkey narrow its trade deficit and alleviate pressure on its currency, which has depreciated by 30% so far this year.
Controversies and Turkey’s Role as an Energy Hub
Turkey has faced criticism from several activists and supporters of Ukraine, accusing the country of effectively assisting Russia in bypassing sanctions and channeling its products to Europe. India, another country that chose not to impose sanctions, has also substantially increased its imports of Russian oil, resulting in savings of around $2.7 billion in the first nine months of 2023. However, Turkey’s per barrel savings have been higher due to its comparatively smaller import volumes and lower freight costs. Additionally, Turkey’s largest oil refiner, Tupras, has enjoyed a gross profit margin of $30 per barrel in the past year, which is $6 per barrel higher than the average margin for a complex refinery in the Mediterranean.
Turkey’s ambition to become a major energy distribution hub for southern Europe aligns with its long-standing plans. Russia, on the other hand, views this hub as an opportunity to redirect its gas exports from Europe or indirectly sell gas to the EU.